Volatile global bond markets unsettle markets
While equity markets usually grab the business headlines, it is the global bond market which really carries the punch. The past month has seen some extreme, and worrying moves on bond markets, with German 10 year bonds moving from 0.05% to 0.90% in an unprecendented period of volatility, in part driven by dwindling liquidity.
Other markets have followed suit, with the US 10 year rate moving from 1.80 to 2.30%, and Australia's from 2.30 to 3.05%.
The background for the situation has been created in part by central bank intervention which has pushed interest rates to unsustainably low levels on the back of QE, and in part by regulators forcing, or at least discouraging, banks from participating as market makers though legislation such as the Volker Rule contained in the Dodd Franks Act.
Expect to hear and feel much more of the outcome of these moves over the weeks to come, with bond markets reportedly 3 times the size of equities. As George Colman from Optimal notes in his monthly note "Beware the bonds: Central banks may just have lost control". Regular readers of Hedge Clippings will note we are prone to quoting George, who has been on the bearish side for some time, but having returned 2% for each of the past two months it is more than possible that his views are worth listening to.
Australia's situation is somewhat different, although no less worrying, in spite of Treasurer Hockey's describing those concerned about the economy as "clowns" for being negative. No sooner had he done so than flat retail sales figures for April were released, possibly indicating who was really wearing the clown's outfit.
Specific results received this week include the following LATEST PERFORMANCE UPDATES:
Supervised High Yield Fund rose 0.52% during April to bring the Fund's annual return since inception to 10.18% aganst the RBA Cash Rate return of 3.47%.
QATO Capital Market Neutral Long/Short Fund although down -2.96% in April has still returned 16.93% over the last 6 months.
The Insync Global Titans Fund fell -0.40% in April, with 12 month performance 19.27%.
Signature Quantitative Fund returned -2.10% for April, to bring the annual performance since inception to 13.11%.
The Cor Capital Fund was down 0.65% in April to bring annual performance since inception to 5.55% p.a., compared to the RBA cash rate of 2.68% p.a.
FUND REVIEWS released this week: Morphic Global Opportunities Fund and Aurora Fortitude Absolute Return Fund.
FUND IN FOCUS VIDEO released this week: Jack Lowenstein, the Joint CIO of the Morphic Global Opportunities Fund discusses the fund's positive return in May and his outlook for markets over the next quarter.
11 - 12 June 2015 - The 2nd Annual Asset Allocation Conference 2015
20 - 21 August 2015 - The 2nd Superannuation Fund Investment Operations Forum 2015
15 September 2015 - AIMA Australia Hedge Fund Forum 2015
And Now for Something Completely Different: One of Australia's larger than life characters of the past 40 or 50 years, Alan Bond, passed away earlier today. "Bondy" had his ups and downs, but always seemed to somehow bounce back from adversity, with an irrepressible attitude and belief.
In 1983 Alan Bond did what many, including the New York Yacht Club, thought was impossible, winning the America's Cup trophy when all before him had failed. Most Australians old enough to remember can still recall the moment on 26th September, 1983 when Australia ll came back from almost certain defeat, prompting wild celebrations even from people who would not have known port from starboard, bow from stern, or halyard from sheet.
You can re-live the final few minutes of the winning race here.
And on that note, Monday being a public holiday to celebrate the Queen's birthday, enjoy the long week-end.
Kind regards,
Chris
CEO
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Australian Fund Monitors are helping to raise awareness to support research into prevention and cure for cerebral palsy. For more information visit www.cpresearch.org.au or contact me by email.
